I am swapping a 5.7,700r4 with a np241 trans case into a 91 yj. I set the motor about 2.5" from the firewall. Now it looks like my rear drive shaft is only going to be less than a foot long. My question is when I lower the trans and transfer case to get the drive shaft straight the motor will be on an angle will it be ok? Thanks for any advice.

If you haven't already welded in your motor mounts do yourself a favor and get the cradle mount. I normally wouldn't suggest it but it seems to work best for the longer auto transmissions like the 700r4. The cradle mount seems to bring the motor forward which is a pain when it comes to installing a fan but it will give you a longer driveshaft. A driveshaft less than 12" will not be useable and would eat through u-joints if it was.

Another option is to cut , move, and reweld your motor mounts (assuming you've already welded them in place) and move them forward. Moving them down will help as well but too much could cause a collision between the oil pan and front axle from any major articulation. Also keep in mind that you want a good amount of the motor mount to be mated to the frame to ensure a solid/sturdy weld.

The motor being on an angle isn't terrible assuming the angle is not too extreme. If you are running a carbureted motor then the angle WILL matter. Fuel injection won't be affected by driveline angle. Any motor placed on an extreme angle could cause oiling problems so keep that in mind too.